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Advertisers tune in to interactive TV

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CIOL Bureau
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Bob Tourtellotte

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LOS ANGELES: Major advertisers are relishing the power of interactive TV - a

medium that allows viewers to shop, email, play games and control what they

watch - to target finely-tuned audiences.

There is a hitch. New technology, such as personal video recorders, also

enables viewers to skip commercials.

But from an advertisers' perspective, interactive TV, or iTV, can provide

vital information about consumer preferences, and the industry is rising to the

challenge.

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Last week, Coca-Cola Co. launched its first interactive advertisement via

service provider RespondTV. Viewers with digital set-top boxes can use a remote

control to click on an icon of Coca-Cola's popular "Polar Bear Twins"

and have a toy bear sent to them in the mail, free.

And Coca-Cola Co. is not alone.

Wink Communications Inc., a creator of iTV ads, has clients that include auto

makers General Motors Corp., Ford Motor Co. and DaimlerChrysler, home product

makers Unilever Plc and Clorox Co. and financial service firm Charles Schwab

Corp.

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"(iTV ads) are yet another way to reach out and touch consumers

directly," said Coca-Cola executive Mart Martin. "It's the connection.

You can watch a cute little polar bear on our commercial, click on the icon and

we will deliver it right to your door."

A new direct marketing tool



Technology research house Forrester estimates that the traditional commercial
model provides TV networks with some $75 billion a year - a figure which is

expected to peak at $86 billion by 2003 - while new forms of advertising could

generate $17 billion in new revenues by 2005.

As a mass market medium that reaches millions of viewers, advertisers have

traditionally never been sure whether consumers are watching ads or going to the

kitchen or the bathroom. As a result, the primary goal of an advertisement is to

blitz viewers with a message and build brand awareness.

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But iTV changes that model and makes the TV a direct marketing tool in the

same way companies for years have used the postal service to target specific

consumer groups.

That idea scared the major broadcast, cable and satellite TV networks only a

couple of years ago because it would give advertisers information on exactly who

was watching ads and whether they were interested in the products being sold.

Although privacy issues are still bound to arise, most companies and

marketers are quick to say they will respect the consumer's right to have their

private information kept private.

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But, the intimate contact with the consumer is considered invaluable.

"The economics are such that the contact - the name of the consumer - is

worth 100 times as much as a general impression," said Josh Bernoff,

principal analyst with Forrester.

Continued...

Compelling advertising



Personal video recorders from the likes of TiVo and Replay TV, which are having
their software put inside the TV set-top boxes of many iTV systems, have so far

proved that viewers are fed up with old-style advertising and often choose to

skip commercials.

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In common with others in the industry, Scott Sassa, president of NBC West

Coast, said advertisers would have to create more exciting ads to keep viewers

glued to their sets.

He likened the situation to magazines like "Vanity Fair" or

"Fortune" to which people often subscribe for the sake of their

advertisements.

For major networks in the United States, widespread iTV is probably more than

five years away, as cable, satellite and broadcast TV operators upgrade systems

to handle the prerequisite digital signals.

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But the market is growing rapidly. Forrester expects about 4.9 million US

homes to have interactive video by the end of 2000, rising to 12.2 million in

2001 and 65.2 million in 2005.

And Europe is further down the road. Britain alone is expected to have more

than four million interactive TV homes by end 2000.

Bernoff sees the amount of traditional ad money lost five years from now to

be about $18 billion, whereas revenue gained from interactive video and other

services would be about $23 billion, for a net gain around $5 billion.

As the market grows, TV networks are expected to be paid by advertisers on

the basis of the number of customer contacts made when ads air. At a later

stage, they will share in any t-commerce sales generated from a specific ad.

A question that remains is whether viewers want to sit up and work with the

TV or recline on the couch and watch.

In Britain, where penetration of digital technology into homes far exceeds

the US, iTV provider OpenTV launched its service in October last year and now

reaches about one in six British homes.

More than 10 per cent of those homes have bought a product over the system

and of those, 35 per cent are repeat buyers.

"The idea that the television was somehow not meant to be interactive is

as silly as saying that PC wasn't meant to be interactive," said RespondTV

president Richard Fischer.

It was only about five or six years ago that the average PC was good for

little more than word processing and spreadsheets - and we all know the Net has

changed all that.

(C) Reuters Limited 2000.

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